Besides confronting perennial challenges of inflation, weak purchasing power, high operating costs, infrastructure deficits and constrained access to finance,  the nation’s Micro, Small and Medium Enterprises (MSMEs), may also be losing between N5 to N10 Trillion to employee corruption and occupational fraud, annually.

 

 

The Centre for The Promotion of Private Enterprise (CPPE) made the disclosure in a statement, signed by its Director General, Dr. Muda Yusuf, on Sunday.

 

 

It described the sum as representing  a massive hidden tax on entrepreneurs in the MSME space, eroding profits, weakening investment capacity, and constraining job creation.

 

 

Worst hit, according to the Centre, are small manufacturing and processing businesses, Agribusiness and Produce Trading, Hospitality, Food Services and Entertainment, Retail and Wholesale Trade, among others, due to those businesses’ high daily cash turnover, weak reconciliation systems, stock diversion and informal procurement chains.

 

 

The organization argued that such occupational fraud, which remains a  ‘corrosive threat’ to businesses in this category, are perpetrated in  multiple forms, such as theft of cash and inventory, diversion of sales proceeds, payroll manipulation, procurement kickbacks, customer diversion, collusion with suppliers or clients, expense reimbursement abuse and falsification of financial records.

 

 

Quoting global occupational-fraud studies,  which consistently estimate organizations’ loss to employee-related fraud to between 5 and 10 percent of annual revenue, CPPE noted that small businesses suffer disproportionately higher losses due  to weaker internal control systems,  heavy dependence on cash transactions,  limited audit capacity, lower detection and recovery rates and high level of informality.

 

 

CPPE warned that while such acts are usually often treated as internal management issues, their aggregate economic consequences are profound.

 

 

Some of such consequences, it stated, include total elimination of profits, depleting working capital and the likelihood of  business closure; since most Nigerian businesses operate on thin margins, often below 15 percent of turnover.

 

 

“This dynamic contributes to the high mortality rate of small businesses, where studies suggest up to 80 percent fail within five years and over half fail within the first year, with employee fraud being a significant contributory factor.

 

 

“Because many MSMEs are labour-intensive, corruption-induced contraction rapidly translates into job losses, declining household incomes, rising informality and deeper poverty,” it added.

 

 

CPPE,  therefore, stressed the need for all concerned not to treat occupational fraud as a mere governance issue, but a national welfare concern.

 

 

This represents a massive hidden tax on entrepreneurs in the MSME space, eroding profits, weakening investment capacity, and constraining job creation.